Law of the Levelhttps://www.lawofthelevel.com
Sheppard Mullin BaseFri, 24 May 2019 23:10:28 +0000en-UShourly1https://wordpress.org/?v=4.9.10Subscribe with My Yahoo!Subscribe with NewsGatorSubscribe with My AOLSubscribe with BloglinesSubscribe with NetvibesSubscribe with GoogleSubscribe with PageflakesSubscribe with PlusmoSubscribe with The Free DictionarySubscribe with Bitty BrowserSubscribe with NewsAlloySubscribe with Live.comSubscribe with Excite MIXSubscribe with Attensa for OutlookSubscribe with WebwagSubscribe with Podcast ReadySubscribe with FlurrySubscribe with WikioSubscribe with Daily RotationTfue Lawsuit Sparks Scrutiny of Gamer Agreements and Esports Agency Activityhttp://feeds.lexblog.com/~r/LawOfTheLevel/~3/w4Us4kIsaGc/
https://www.lawofthelevel.com/2019/05/articles/esports/tfue-lawsuit-scrutiny-gamer-agreements/#respondThu, 23 May 2019 18:47:22 +0000https://www.lawofthelevel.com/?p=2292In a lawsuit filed yesterday against esports entertainment organization, FaZe Clan, Turner Tenney (“Tfue”), a twenty-one year old professional gamer and streamer alleges that the exploitation of young, unsophisticated content creators (streamers) has become standard in the esports industry, and that he is a victim. Tenney claims that the “gamer agreement” he signed with FaZe...… Continue Reading

]]>In a lawsuit filed yesterday against esports entertainment organization, FaZe Clan, Turner Tenney (“Tfue”), a twenty-one year old professional gamer and streamer alleges that the exploitation of young, unsophisticated content creators (streamers) has become standard in the esports industry, and that he is a victim.

Tenney claims that the “gamer agreement” he signed with FaZe Clan when he was twenty years old is illegal for multiple reasons – he alleges that it is “grossly oppressive, onerous, and one-sided,” because it entitles FaZe Clan to a finder’s fee of up to eighty percent (80%) of the revenue paid by third-parties for Tenney’s services and that it contains anticompetitive provisions that unlawfully restrain his ability to make deals that are not sourced by FaZe Clan. Tenney also argues that FaZe Clan is acting as his agent and has a fiduciary duty to him, which he alleges FaZe Clan breached when it rejected a sponsorship offer for Tenney because of a conflict of interest.

Tenney’s lawsuit further argues that his gamer agreement is unenforceable under California’s Talent Agencies Act (the “TAA”), which provides that a person or corporation must procure a license from the California Labor Commissioner in order to engage “in the occupation of procuring, offering, promising, or attempting to procure employment or engagements for an artist or artists.” Indeed, in addition to the complaint, Tenney has filed a petition with the California Labor Commission – which has jurisdiction over claims arising under the TAA – seeking a determination that his gamer agreement is void ab initio because FaZe Clan “continuously and systematically procures and attempts to procure employment and engagements” for Tenney without a talent agency license. And, Tenney is requesting, among other things, that the Labor Commissioner order FaZe Clan to disgorge and repay to Tenney any and all monies received by FaZe Clan, directly or indirectly, as a result of the gamer agreement. The issue of whether a company’s actions meet this description, and thus require a license, has been litigated in the entertainment industry for years. The TAA has survived numerous legal challenges by litigants who argue, among other things, that it is unconstitutionally vague and does not clearly put managers on notice of activity that requires a license.

The statements made by Tenney’s attorneys in the complaint and related press indicate there will be further scrutiny of, and challenges to, gamer agreements and esports management activities in the courts and in the press. To avoid disputes and ensure the enforceability of gamer agreements, people and corporations who contract with professional gamers should seek legal advice in forming their agreements and encourage the talent to retain appropriate representation for the negotiation of their contracts.

]]>https://www.lawofthelevel.com/2019/05/articles/esports/tfue-lawsuit-scrutiny-gamer-agreements/feed/0https://www.lawofthelevel.com/2019/05/articles/esports/tfue-lawsuit-scrutiny-gamer-agreements/What Game Companies Need to Know About FinCEN’s Updated Guidance on Virtual Currencyhttp://feeds.lexblog.com/~r/LawOfTheLevel/~3/JKlUBfG85Ns/
https://www.lawofthelevel.com/2019/05/articles/virtual-currency/fincen-cvc/#respondFri, 10 May 2019 21:37:02 +0000https://www.lawofthelevel.com/?p=2287FinCEN has issued updated guidance addressing the use of crypto currency and other convertible virtual currency (CVC). A portion of this guidance addresses the use of CVC in games. The guidance does not establish any new regulatory expectations. Rather, it consolidates current FinCEN regulations, guidance and administrative rulings that relate to money transmission involving virtual...… Continue Reading

]]>FinCEN has issued updated guidance addressing the use of crypto currency and other convertible virtual currency (CVC). A portion of this guidance addresses the use of CVC in games. The guidance does not establish any new regulatory expectations. Rather, it consolidates current FinCEN regulations, guidance and administrative rulings that relate to money transmission involving virtual currency.

In 2011, FinCEN issued a final rule (“Bank Secrecy Act Regulations – Definitions and Other Regulations Relating to Money Services Businesses,” 76 FR 43585 (July 21, 2011)) defining a money services business (“2011 MSB Final Rule”). The 2011 MSB Final Rule made clear that persons accepting and transmitting value that substitutes for currency, such as virtual currency, can be money transmitters.

After issuance of the 2011 MSB Final Rule, FinCEN received questions from industry on whether the new rule applied to transactions denominated in all types of virtual currency, including, for example, virtual currency that could only be used inside video games. Some persons involved in transactions denominated in CVC sought to register with FinCEN as either currency exchangers or prepaid access providers or sellers, rather than as money transmitters. To address these and other issues, on March 18, 2013, FinCEN issued interpretive guidance (“Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies”) on the application of FinCEN’s regulations to transactions involving the acceptance of currency or funds and the transmission of CVC (“2013 VC Guidance”). The 2013 VC Guidance described what CVC is for purposes of FinCEN regulations, and reminded the public that persons not exempted from MSB status that accept and transmit either real currency or anything of value that substitutes for currency, including virtual currency, are covered by the definition of money transmitter.

The 2013 VC Guidance also identified the participants to generic CVC arrangements, including an “exchanger,” “administrator,” and “user,” and further clarified that exchangers and administrators generally qualify as money transmitters under the BSA, while users do not. An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency, while an administrator is a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency. A user is “a person that obtains virtual currency to purchase goods or services” on the user’s own behalf.

FinCEN noted that an administrator or exchanger that (1) accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN’s regulations, unless a limitation to or exemption from the definition applies to the person. FinCEN’s regulations define the term “money transmitter” as a person that provides money transmission services, or any other person engaged in the transfer of funds. The term “money transmission services” means “the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.

According to FinCEN, the definition of money transmitter includes a person that accepts and transmits value that substitutes for currency from one person to another person or to another location. That money transmission includes acceptance of value from one person and transmission to another person is fairly well understood. What is perhaps less clearly understood by some, and potentially relevant to some game companies, relates to the “another location” portion of the test. The 2013 VC Guidance clarified that FinCEN interprets the term “another location” broadly. For example, it stated that transmission to another location occurs when an exchanger selling CVC accepts real currency or its equivalent from a person and transmits the CVC equivalent of the real currency to the person’s CVC account with the exchanger. This circumstance constitutes transmission to another location because it involves a transmission from the person’s account at one location (e.g., a user’s real currency account at a bank) to the (same) person’s CVC account with the exchanger. See 2013 VC Guidance, at 4.

The range of business models used in the game industry continues to expand. As game companies adopt new models, it is critical to get a assessment of the legality of the business model and any regulatory obligations it may trigger. The introduction of crypto currencies potentially complicates the analysis. However, FinCEN’s guidance is applicable to other CVC as well.

]]>https://www.lawofthelevel.com/2019/05/articles/virtual-currency/fincen-cvc/feed/0https://www.lawofthelevel.com/2019/05/articles/virtual-currency/fincen-cvc/Senator Wants to Ban Loot Boxes and Pay-to-Win Aimed at Kidshttp://feeds.lexblog.com/~r/LawOfTheLevel/~3/17omVFyDgD8/
https://www.lawofthelevel.com/2019/05/articles/loot-boxes/ban-loot-boxes-targeting-kids-microtransactions/#respondWed, 08 May 2019 21:51:38 +0000https://www.lawofthelevel.com/?p=2284In the latest salvo in the ongoing debate about whether certain game mechanics are exploiting kids, Senator Josh Hawley (R-MO) announced that he has introduced a bill to ban the alleged exploitation of children through “pay-to-win” and “loot box” monetization. According to Hawley, “The Protecting Children from Abusive Games Act” would apply new consumer “protections”...… Continue Reading

]]>In the latest salvo in the ongoing debate about whether certain game mechanics are exploiting kids, Senator Josh Hawley (R-MO) announced that he has introduced a bill to ban the alleged exploitation of children through “pay-to-win” and “loot box” monetization. According to Hawley, “The Protecting Children from Abusive Games Act” would apply new consumer “protections” to games played by minors including:

Games targeted at those under the age of 18 (this would be determined by subject matter, visual content, and other indicators similar to those used to determine applicability of the Children’s Online Privacy Protection Act (COPPA))

Manipulation of a game’s progression system, typically by building artificial difficulty or other barriers into game progression to induce players to spend money on microtransactions to advance through content supposedly available to them at no additional cost

Manipulation of the competitive balance between players of multiplayer games by allowing players who purchase microtransactions competitive advantages over other players

These rules would be enforced by the Federal Trade Commission, which would treat the distribution of such games by publishers and online distributors as an unfair trade practice.

State attorneys general would also be empowered to file suit to defend the residents of their states. As we previously reported, the FTC itself has announced that it will be holding workshops on loot boxes this fall. The impetus for the bill, according to Hawley, is that “When a game is designed for kids, game developers shouldn’t be allowed to monetize addiction” and “When kids play games designed for adults, they should be walled off from compulsive microtransactions.”

]]>https://www.lawofthelevel.com/2019/05/articles/loot-boxes/ban-loot-boxes-targeting-kids-microtransactions/feed/0https://www.lawofthelevel.com/2019/05/articles/loot-boxes/ban-loot-boxes-targeting-kids-microtransactions/Converting an IPR Loss into a District Court Winhttp://feeds.lexblog.com/~r/LawOfTheLevel/~3/6A_Bbl_7oKM/
https://www.lawofthelevel.com/2019/05/articles/intellectual-property/converting-an-ipr-loss-into-a-district-court-win/#respondWed, 08 May 2019 17:53:05 +0000https://www.lawofthelevel.com/?p=2282It is very common to defend against a claim of patent infringement by litigating in the district court and the PTAB in parallel. The most straightforward-way for the defendant to win is to persuade the PTAB that the asserted patent is invalid. But, that is becoming more difficult as Director Iancu pushes the PTAB to...… Continue Reading

]]>It is very common to defend against a claim of patent infringement by litigating in the district court and the PTAB in parallel. The most straightforward-way for the defendant to win is to persuade the PTAB that the asserted patent is invalid. But, that is becoming more difficult as Director Iancu pushes the PTAB to apply greater scrutiny to petitions in order to address patent owner criticism that the PTAB proceedings are unfair. However, a recent decision disposing of a non-practicing entity’s long-running litigation against Ubisoft highlights how a defendant that ultimately lost on an issue before the PTAB can use the loss to their advantage in district court.

Princeton Digital’s ’129 patent claimed creating and controlling a virtual environment in part based on a prerecorded control track having control information corresponding to a music signal. Id. at 8. The court found that there was no dispute as to how the accused products operate. One example is Ubisoft’s Rocksmith. During development, a designer creates a beat map by listening to an audio file, and tapping out where the beats are to create a “beat map.” The musical notes to be displayed to the player are layered onto the beat map according to the time code in the audio file. During game play, the audio file begins playing and starts a timer. The game’s graphical elements are triggered by the beat map and the timer. Id. at 13-14. Ubisoft presented evidence that the graphical elements are displayed regardless of the content of the audio file. For example, if the audio file was replaced with white noise, the game would continue displaying the graphical elements according to the beat map.

Ubisoft filed a petition for inter partes review based upon the Williams reference. The Williams reference taught methods of synchronizing actions and sounds for display on a computer system. Id. at 9. In order to avoid institution of inter partes review, Princeton Digital argued that Williams did not render the claims unpatentable. Princeton Digital claimed that Williams teaches synchronizing actions such as “face changes, arm movements, a bird flying…with the time, positions or locations in the sound recording….” Id. at 10. Princeton Digital argued that this did not invalidate the claims because using time, position or location in an audio file as the control information does not meet the claim’s requirement that the control information is based on the content of the musical signal. Id. This argument won at the PTAB, and the Ubisoft’s IPR was not instituted for those claims.

Magistrate Judge Burke found that Princeton Digital’s statements in the IPR disclaimed “a control track with control information that corresponds to time, position, or locations in a sound record—such that ‘once the timer starts, the graphics are displayed irrespective of the audio content.’” Id. at 17. Given there was no dispute as to how Ubisoft’s games worked (i.e. the graphical elements were displayed based upon time), the court found that patent owner’s disclaimer was dispositive and recommended granting Ubisoft summary judgment of noninfringement. Id. at 20-21.

In short, the Princeton Digital Image decision is a timely reminder defendants should spend some time mining the patent owner’s statements from the inter partes review for admissions and disclaimers that can be used in the district court litigation.

]]>https://www.lawofthelevel.com/2019/05/articles/intellectual-property/converting-an-ipr-loss-into-a-district-court-win/feed/0https://www.lawofthelevel.com/2019/05/articles/intellectual-property/converting-an-ipr-loss-into-a-district-court-win/EU Objects to Game Companies Geo-blocking Video Gameshttp://feeds.lexblog.com/~r/LawOfTheLevel/~3/RvkjDLoecAM/
https://www.lawofthelevel.com/2019/04/articles/video-game-law/eu-objects-geo-blocking-video-games/#respondFri, 12 Apr 2019 19:15:55 +0000https://www.lawofthelevel.com/?p=2272The European Commission has informed various game companies (platforms and publishers) of its preliminary view that the companies prevented consumers from purchasing video games cross-border from other Member States, in breach of EU competition rules. According to the Commissioner in charge of competition policy: In a true Digital Single Market, European consumers should have the...… Continue Reading

]]>The European Commission has informed various game companies (platforms and publishers) of its preliminary view that the companies prevented consumers from purchasing video games cross-border from other Member States, in breach of EU competition rules.

According to the Commissioner in charge of competition policy:

In a true Digital Single Market, European consumers should have the right to buy and play video games of their choice regardless of where they live in the EU. Consumers should not be prevented from shopping around between Member States to find the best available deal. Valve and the five PC video game publishers now have the chance to respond to our concerns.

Many of the games at issue require an “activation key” for consumers to authenticate the game and play it.

The Commission’s preliminary view is that the game companies entered into bilateral agreements to prevent consumers from purchasing and using PC video games acquired elsewhere than in their country of residence (so-called “geo-blocking”) against EU antitrust rules.

In particular, the Commission expressed concerns that:

The companies agreed, in breach of EU antitrust rules, to use geo-blocked activation keys to prevent cross-border sales, including in response to unsolicited consumer requests (so-called “passive sales”) of PC video games from several Member States (i.e. Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and in some cases Romania). This may have prevented consumers from buying cheaper games available in other Member States.

Certain companies broke EU antitrust rules by including contractual export restrictions in their agreements with a number of distributors which prevented them from selling the relevant PC video games outside the allocated territories, which could cover one or more Member States. These practices may have prevented consumers from purchasing and playing PC video games sold by these distributors either on physical media, such as DVDs or through downloads.

The Commission’s preliminary view, outlined in its Statements of Objections, is that these business practices partitioned markets according to national borders and restricted passive sales to consumers. These business practices ultimately denied European consumers the benefits of the EU’s Digital Single Market to shop around for the most attractive offer.

If confirmed, this would infringe Article 101 of the Treaty on the Functioning of the European Union, which prohibits anti-competitive agreements.

]]>https://www.lawofthelevel.com/2019/04/articles/video-game-law/eu-objects-geo-blocking-video-games/feed/0https://www.lawofthelevel.com/2019/04/articles/video-game-law/eu-objects-geo-blocking-video-games/DOJ Asserts Wire Act Opinion Doesn’t Cover Lotterieshttp://feeds.lexblog.com/~r/LawOfTheLevel/~3/YCvv07I-uPw/
https://www.lawofthelevel.com/2019/04/articles/gambling/wire-act-lotteries-new-hampshire/#respondThu, 11 Apr 2019 19:32:27 +0000https://www.lawofthelevel.com/?p=2268In an effort to side-step the lawsuit filed against it by the New Hampshire Lottery (and others), the Department of Justice (DOJ) asserts that its recent reinterpretation of the Wire Act doesn’t apply to lotteries. As we previously reported, the New Hampshire Lottery has sued the DOJ to prevent enforcement of the DOJ’s opinion (issued in January 2019) reinterpreting...… Continue Reading

]]>In an effort to side-step the lawsuit filed against it by the New Hampshire Lottery (and others), the Department of Justice (DOJ) asserts that its recent reinterpretation of the Wire Act doesn’t apply to lotteries. As we previously reported, the New Hampshire Lottery has sued the DOJ to prevent enforcement of the DOJ’s opinion (issued in January 2019) reinterpreting the Wire Act. As we also reported, the January 2019 DOJ opinion reversed the position it took in 2011 that the entirety of the Wire Act is limited to sports betting. The new opinion concluded that only one of four parts of the Wire Act apply to sports betting, while the other three apply to any online betting.

In support of its motion to dismiss the lawsuits, the DOJ argued that its recent opinion did not address whether or not lotteries are subject to the Wire Act’s prohibitions. As a result, the DOJ argued that the declaratory judgement actions should be dismissed for lack of standing (due to no reasonable apprehension of suit by the DJ plaintiffs).

One of the attorneys for the plaintiff was quoted as saying: “Desperate to avoid judicial review of its radical reinterpretation of the Wire Act, DOJ now is backtracking from the clear import of the reversal of position that it supposedly had so carefully considered,” and “DOJ’s eleventh-hour statement that it may — or may not — further revise its interpretation of the Wire Act only underscores the arbitrariness of the reversal of DOJ’s long-held position that the Wire Act addresses only sports betting activities.”

]]>https://www.lawofthelevel.com/2019/04/articles/gambling/wire-act-lotteries-new-hampshire/feed/0https://www.lawofthelevel.com/2019/04/articles/gambling/wire-act-lotteries-new-hampshire/Caution to Game Companies: PTAB Continues to Preclude PTAB Challenges That It Views As Untimelyhttp://feeds.lexblog.com/~r/LawOfTheLevel/~3/pPz47BOXD3g/
https://www.lawofthelevel.com/2019/04/articles/patent/ptab-ptab-challenges-valve/#respondWed, 10 Apr 2019 22:31:50 +0000https://www.lawofthelevel.com/?p=2266In a proceeding that included Patent Office Director Andrei Iancu on the panel, the PTAB issued an order this past week denying institution of 3 IPRs filed by Valve. The decision demonstrates that the PTAB continues to tighten its standards for institution of post-grant challenges, including based upon considerations related to what it perceives as...… Continue Reading

]]>In a proceeding that included Patent Office Director Andrei Iancu on the panel, the PTAB issued an order this past week denying institution of 3 IPRs filed by Valve. The decision demonstrates that the PTAB continues to tighten its standards for institution of post-grant challenges, including based upon considerations related to what it perceives as fairness to patent owners.

In federal district court, Valve and HTC had been accused of infringing the same patents. The plaintiff dismissed its case against Valve without prejudice. HTC proceeded to file its own IPR challenges for the asserted patents, and the PTAB issued its institution decisions for each of the HTC’s challenges. Recently, the Federal Circuit found that an accused infringer must file an IPR challenge within one year of being served with a complaint, even if the complaint was dismissed without prejudice. In response to that decision, Valve filed its own IPR challenges.

The PTAB denied institution of Valve’s IPR challenges as an exercise of its statutory discretion under 35 U.S.C. 314(a). In reaching the decision, the PTAB considered the factors it created in the General Plastic decision. As part of that analysis, the PTAB found that Valve and HTC were “similarly situated” because both companies were co-defendants in the same case and were accused of infringing the same patents. The PTAB found that instituting Valve’s later-filed IPR challenges would give Valve an unfair advantage over the Patent Owner because Valve could use the Patent Owner’s preliminary responses and the PTAB’s institution decisions for the HTC IPR challenges when preparing Valve’s IPR challenges. The fact that Valve filed its IPR challenges in order to account for the change in law did not prevent the PTAB from denying institution.

This decision is yet another cautionary signal to game companies and other defendants to not delay filing PTAB challenges, even if they believe there are legitimate reasons for waiting to file. Given the PTAB’s increasing scrutiny of the timing of post-grant challenges beyond just the one-year statute of limitations triggered by the service of a complaint, game companies are best served to promptly file any PTAB challenges for patent assertions against their products, including in situations where they are not directly named as a party.

]]>https://www.lawofthelevel.com/2019/04/articles/patent/ptab-ptab-challenges-valve/feed/0https://www.lawofthelevel.com/2019/04/articles/patent/ptab-ptab-challenges-valve/FTC Loot Box Workshop Announcedhttp://feeds.lexblog.com/~r/LawOfTheLevel/~3/-b65bjgtvTY/
https://www.lawofthelevel.com/2019/04/articles/loot-boxes/ftc-loot-box-workshop-announced/#respondMon, 08 Apr 2019 21:45:28 +0000https://www.lawofthelevel.com/?p=2263The Federal Trade Commission FTC has announced that it will hold a public workshop on August 7, 2019 to examine consumer protection issues related to video game “loot boxes.” As we have previously reported, loot boxes have been under scrutiny by regulators around the world. In the U.S., these issues were recently raised in a...… Continue Reading

]]>The Federal Trade Commission FTC has announced that it will hold a public workshop on August 7, 2019 to examine consumer protection issues related to video game “loot boxes.” As we have previously reported, loot boxes have been under scrutiny by regulators around the world. In the U.S., these issues were recently raised in a November 27, 2018, Congressional oversight committee hearing. During this hearing, Senator Maggie Hassan (D-N.H.) described loot boxes as “endemic in the video game industry,” adding that “children may be particularly susceptible to engaging with these in-game purchases, which are often considered integral components of video games.” In response, FTC Chairman Joe Simons assured Sen. Hassan that the FTC would “investigate these mechanisms to ensure that children are being adequately protected and…[would] educate parents about potential addiction.”

The workshop, “Inside the Game: Unlocking the Consumer Issues Surrounding Loot Boxes,” will bring together a variety of stakeholders, including industry representatives, consumer advocates, trade associations, academics, and government officials to discuss concerns regarding the marketing and use of loot boxes and other in-game purchases, and the potential behavioral impact of these virtual rewards on young consumers.

The workshop will cover:

The in-game transaction landscape, including the origins and evolution of loot boxes and their role in game play and the digital marketplace;

Research examining consumer behavior, including child and adolescent behavior, in the context of video games and digital transactions; and

A discussion of consumer awareness and education about in-game digital transactions, including the mechanics, marketing, and financial commitments associated with loot boxes.Check back and we will provide updates as further information becomes available.

]]>https://www.lawofthelevel.com/2019/04/articles/loot-boxes/ftc-loot-box-workshop-announced/feed/0https://www.lawofthelevel.com/2019/04/articles/loot-boxes/ftc-loot-box-workshop-announced/Unpacking Recent Loot Box Updateshttp://feeds.lexblog.com/~r/LawOfTheLevel/~3/eUemSU_PuY0/
https://www.lawofthelevel.com/2019/02/articles/loot-boxes/unpacking-recent-loot-box-updates/#respondThu, 28 Feb 2019 18:20:42 +0000https://www.lawofthelevel.com/?p=2258As we have previously reported, as loot boxes have become increasingly popular in high-profile video games, they have come under greater legal scrutiny. Several jurisdictions have indicated they are not illegal gambling, but other jurisdictions have found some implementations to be illegal gambling. Even in the jurisdictions where loot boxes are not deemed gambling, regulators...… Continue Reading

]]>As we have previously reported, as loot boxes have become increasingly popular in high-profile video games, they have come under greater legal scrutiny. Several jurisdictions have indicated they are not illegal gambling, but other jurisdictions have found some implementations to be illegal gambling. Even in the jurisdictions where loot boxes are not deemed gambling, regulators have raised concerns about whether loot boxes raise other issues. One alleged concern is the potential impact on children and the potentially addictive nature of loot boxes, though little, if any, hard evidence to date supports this.

In the U.S., these issues were recently raised in a November 27, 2018, Congressional oversight committee hearing. During this hearing, Senator Maggie Hassan (D-N.H.) described loot boxes as “endemic in the video game industry,” adding that “children may be particularly susceptible to engaging with these in-game purchases, which are often considered integral components of video games.” In response, FTC Chairman Joe Simons assured Sen. Hassan that the FTC would “investigate these mechanisms to ensure that children are being adequately protected and…[would] educate parents about potential addiction.” In response to Sen. Hassan’s inquiry whether the FTC would “commit to undertaking this project and keeping [the] committee informed,” FTC Chairman Simons replied with a simple, “yes.”

However, because no further updates had been released by the FTC by late January 2019, in an apparent attempt to increase the political pressure, Sen. Hassan sent a letter to the FTC chairman, requesting a status update “as soon as practicable.” Sen. Hassan also requested a timeline for such an investigation, and a proposal of next steps. Sen. Hassan reemphasized the urgency of the FTC investigation of loot boxes, describing it as a necessary step to “adequately protect children and other vulnerable people who play video games, as well as to better educate parents and players about the possibility of addiction and other negative behaviors resulting from loot box exposure.”

According to reports, the FTC Chairman responded to Sen. Hassan’s letter by declining to comment on the timeline of such an investigation, or whether one is currently taking place. FTC Chairman Simons described these details as “nonpublic law enforcement efforts.” Simons did make clear, however, that the FTC is taking steps to address the issues surrounding loot boxes. Specifically, the FTC is planning a public workshop on loot boxes, scheduled for “later this year,” to “provide a forum for stakeholders representing wide-ranging perspectives including consumer advocacy organizations, parent groups, and industry members.” According to the FTC Chairman, such a public workshop could “also help elicit information to guide subsequent consumer outreach, which could include a consumer alert.”

This is the first indication of definitive steps taken by the FTC to address loot boxes, and a clear indication that it plans to hear from various stakeholders on this increasingly controversial topic. Check back for more updates as we track developments in the industry.

]]>https://www.lawofthelevel.com/2019/02/articles/loot-boxes/unpacking-recent-loot-box-updates/feed/0https://www.lawofthelevel.com/2019/02/articles/loot-boxes/unpacking-recent-loot-box-updates/DOJ Sued Over its Reinterpretation of the Wire Acthttp://feeds.lexblog.com/~r/LawOfTheLevel/~3/tK2qHwJNO0o/
https://www.lawofthelevel.com/2019/02/articles/gambling/doj-sued-reinterpretation-wire-act/#respondTue, 19 Feb 2019 21:05:52 +0000https://www.lawofthelevel.com/?p=2253It didn’t take long. The New Hampshire Lottery has sued the Department of Justice (DOJ) to prevent enforcement of the DOJ’s opinion (issued last month) reinterpreting the Wire Act. As we reported last month, the DOJ reversed the position it took in 2011 that the entirety of the Wire Act is limited to sports betting. It newly concludes that only...… Continue Reading

]]>It didn’t take long. The New Hampshire Lottery has sued the Department of Justice (DOJ) to prevent enforcement of the DOJ’s opinion (issued last month) reinterpreting the Wire Act. As we reported last month, the DOJ reversed the position it took in 2011 that the entirety of the Wire Act is limited to sports betting. It newly concludes that only one of four parts of the Wire Act apply to sports betting, while the other three apply to any online betting.

The NH Lottery complaint raised concerns about its new “iLottery” gaming platform that gives players located in New Hampshire the ability to purchase and play select lottery games on their personal computers, mobile and electronic devices. Despite requiring that any players purchasing lottery tickets through its iLottery platform be located in New Hampshire and using age verification software and geolocation technology, the NH Lottery is concerned the new interpretation could render its activity illegal. The reason, as acknowledged in the complaint, is that transmissions through New Hampshire Lottery’s iLottery may sometimes travel across interstate lines.

The suit seeks a declaration that “the Wire Act does not prohibit the use of a wire communication facility to transmit in interstate commerce bets, wagers, receipts, money, credits, or any other information related to any type of gaming other than gambling on sporting events and contests.”

Prior to 2011, the only federal court of appeals to address the issue held that the phrase “on any sporting event or contest” applies to all prohibitions set forth in Section 1084(a). See In re Mastercard Int’l, Inc., 313 F.3d 257, 262–63 (5th Cir. 2002) (“[T]he Wire Act does not prohibit non-sports internet gambling . . . .”). Since 2011, no court has held in a published opinion that the Wire Act applies to any type of gaming other than gambling on sporting events. In 2014, the First Circuit agreed with the conclusions of the 2011 Opinion, concluding that the Wire Act is limited to betting and wagering on “any sporting event or contest.” United States v. Lyons, 740 F.3d 702, 718 (1st Cir. 2014). Given that the suit was filed in New Hampshire, if it goes to appeal, that appeal will be decided by the First Circuit Court of Appeals.

This is the first, but not likely the last, suit to be filed against the DOJ for its recent opinion. Check back for updates.